An Amateur Classicist's Review of Political Philosophy, Theology, and Literature, with Occasional Reflections on the Age That Is Passing

Tuesday, August 28, 2007

The Varieties of Corporate Welfare, Exposed

Big Business is one of the obvious features of modern life. Its left-wing opponents regard corporate America as rogues relentlessly maximizing profit and bristling at every government regulation, intent on returning American law to the age of unregulated robber barons. Its right-wing defenders valorize the corporation for its economic productivity and seemingly tireless pursuit of consumer satisfaction through innovation and sound business sense--all without the inefficiency and stultification of government intervention.

Tim Carney's The Big Ripoff attacks many of these superficial themes, but also reveals how such rhetoric does not go far enough in its criticism or its praise. Subtitled How Big Business and Big Government Steal Your Money, his book reveals the curious alliance of business and government interests as two symbiotic parasites leeching upon taxpayers, consumers, and smaller entrepreneurs.

Regulation too often is written by the largest actors in the very industries targeted for legal constraints. Regulation means higher costs of entry for would-be competitors and more overhead for already-existing but less powerful competition. Regulation efforts ensure closer cooperation between the most influential businesses and the public sector. Such efforts serve the expansive tendencies of government bureaucracies and provide politicians the resume-building opportunity of Standing Up to Big Business. The businesses supporting state regulation also gain a reputation for being responsible corporate citizens, while their more radical political opposition find attempts at more restrictive legislation forestalled.

Carney reports that tax increases are also often supported by business organizations. Tax hikes often provide funds for direct or indirect corporate subsidies. The potential variety of this indirect support is unnerving: infrastructure improvements, worker education programs, and mass transportation, even when serving public purposes also reduce some business expenses. Even redistributionary schemes could find support in some sectors: Walmart, the corporate bugbear par excellence, would benefit from the welfare-induced increased spending power of its lower-class clientele, and such logic was at work in its political support for a minimum wage hike.

The story of the American sugar industry is perhaps the most grievous example of corporate welfare recounted in The Big Ripoff. US Sugar and the Fanjul family both dominate the American sugar supply. They have secured not only a highly protective quota against foreign importers, but also exemptions from said quota for their corporate-owned sugarfields in the Dominican Republic. They are major beneficiaries of the damaging swamp-draining infrastructure of the Everglades, governmental loans, and guaranteed sales at twice the international rate. Worse, the artificially high price of sugar has established corn syrup as the leading ingredient in many American foods, thus allying corn-growers with an industry that would otherwise be its competition.

The Florida-based Fanjuls carefully guard their privileges through bipartisan support for key politicians in their crucial swing state, and they get their money's worth: Carney estimates the sugar complex needlessly costs taxpayers and consumers $1.9 billion per year.

Other anecdotes explore the revolting abuses of eminent domain, the incoherence of programs which join foreign policy with business expansion, and the sad, wearisome ways in which legislation merely allies itself with cartelization and oligopoly.

At times the thought of this incestuous network of collaborating interests induces hopelessness. How can one repeal even one subsidy benefitting a powerful, energetic few but of only minimal consequence to most voters?. How can one start a business if one faces a mountain of regulations cooked up by one's largest competitors?

At other points, Carney's efforts encourage that shadow of despair: cynicism. While any piece of legislation has self-interested parties for and against, the capacity for disinterested deliberation can be corrupted by constant analysis of ulterior motives as much as by monied interests. Though Carney is careful to qualify his polemic, his work needs the complement of a wise understanding of sound public policy.

That said, The Big Ripoff is a certain cure for the naivety found among both reformers and free marketeers.